How to see Cycle's material transparency in 3D View
I think I've figured this issue out. I'm in Blender Cycles.

To see the transparency, make sure you're in the "Material" view in your viewport.



With your image-plane selected, go to the Material tab.



Toggle down "Settings" at the very bottom. Make sure "Viewport Alpha:" is set to something other than "Opaque". I find "Alpha Clip" and "Alpha Blend" worked well for the .png image I was using.



Hopefully this answers your question.